RECENT ECONOMIC events in Ireland prompted the US Securities and Exchange Commission (SEC) to ask Google for a more detailed explanation of the relationship between its foreign pretax income and its effective tax rates.
According to filings released yesterday, the commission informed Google that such “enhanced disclosures” now seem “more relevant” because of recent uncertainty associated with the economic conditions and events in Ireland and Europe. This request was made in a letter to the internet search giant on December 29th. A Google spokesman said last night that this was part of a routine review by the SEC of all filings by public companies.
In a December 2nd letter, commission officials had asked Google for “disclosures to explain in greater detail the impact on your effective income tax rates and obligations of having proportionally higher earnings in countries where you have lower statutory tax rates”.
The company responded to the requests for information, the filings show.
The commission then said in a February 3rd letter that it had completed its review of Google’s filings, and had “no further comments at this time on the specific issues raised”.
Google has used a tax-cutting strategy that has gained favour among some US companies. Google cut income taxes by $3.1 billion over three years by shifting the bulk of foreign profits to Ireland, then the Netherlands and eventually to no-tax Bermuda, according to regulatory filings in the US and abroad.
The strategy, involving a pair of techniques known to lawyers as the “Double Irish” and the “Dutch Sandwich”, helped cut the company’s income tax rate to 2.4 per cent on the profits it attributed to its foreign subsidiaries over three years, filings show.
The statutory corporate income tax rate in the US is 35 per cent. US multinational corporations had more than $1 trillion in profits stashed in overseas subsidiaries on which they had paid no US income tax as of the end of 2009, according to data compiled by Bloomberg.
John Nester, a spokesman with the SEC, said the agency had no further comment on the exchange with Google. Google’s Europe, Middle East and Africa headquarters are based in Dublin. – (Additional reporting Bloomberg)
